Accounting for Special Transactions Quizzes PDF

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Accounting for Special TransactionsPartnership (Chap 17-19) - theories Partnership residual profit and loss must always be equal. False If no profits and losses sharing arrangement is specified in the partnership agreement, the partnership requires that profits and losses be divided equally after th...

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Accounting for Special Transactions Partnership (Chap 17-19) - theories 1. Partnership residual profit and loss must always be equal. False 2. If no profits and losses sharing arrangement is specified in the partnership agreement, the partnership requires that profits and losses be divided equally after the industrial partner is given his just and equitable share. False 3. What change occurs to continuing partners’ capital accounts when a withdrawing partner is assigned goodwill at the date of withdrawal? a. Continuing partners’ capital accounts decease by their profit and loss ratio proportion of the goodwill assigned to the withdrawing partner b. Continuing partners’ capital accounts do not change c. Goodwill cannot be recognized with regard to withdrawing partners d. Continuing partners’ capital accounts increase 4. What amount of goodwill can be recognized at the date a partner withdraws from a partnership? a. Goodwill may not be recognized at the date a partner withdraws b. The withdrawing partner’s portion of goodwill c. Either the withdrawing partner’s portion of goodwill or the goodwill attributable to the entire partnership d. The continuing partners’ portion of goodwill 5. Any loss incurred by the partnership should always be allocated equally to the partners. False 6. What portion of the partnership’s assets must be revalued when a partner withdraws from the partnership? a. The withdrawing partner’s share must be revalued b. All of the partnership’s assets must be revalued c. Any or all of the partnership’s assets may be revalued but none have to be revalued d. Partnership assets may not be revalued when a partner withdraws 7. The value assigned to noncash assets contributed to the partnership must always be the fair market value regardless of any agreement between the partners. False 8. Which of the following statements is true with regard to a withdrawing partner? a. A bonus may be paid to the retiring partner b. A bonus must be paid to the retiring partner c. Recognizing a bonus is not appropriate when a partner retires d. A bonus must be paid to the retiring partner or to the remaining partners 9. The following must exist to create the potential for a retiring partner to have a bonus recognized at the date of withdrawal except a. The existing partners must decide to not admit a new partner to the partnership b. The retiring partner must be paid more than the book value of his equity c. The retiring partner’s equity must be acquired by the partnership d. All of the above are necessary for a bonus to be recognized

10. Interest on loans from partners is record in the partnership books as an expense. True 11. A partnership is an accounting entity and a taxable entity. False 12. Only individuals are allowed to be partners in a partnership. False 13. In what manner do the remaining partners share in the bonus paid to a withdrawing partner? a. Equally b. In proportion to their capital account balances c. In proportion to their residual profit and loss ratios d. The partner with the greatest capital account is assigned the bonus 14. A partnership can give donations to charity. True 15. A partnership can be established for charity and religious purposes. False 16. If existing partners acquire the equity of a withdrawing partner, in what manner do they divide the equity? a. Existing partners are not permitted to acquire the equity of a withdrawing partner b. In any manner they choose c. Equally d. Proportionate to their residual profit and loss ratios 17. Allocation of any change to capital accounts as a result of an error corrected should be based on the profit and loss ratio that existed when the error occurred. False Partnership Liquidation (Chap 20-21) – Problems 1. The Henry, Isaac and Jacobs partnership was about to enter liquidation with the following account balances: Cash . . . . . . . . . . . . . . . . .

P 90,000

Noncash assets . . . . . . . . .

300,000

Total . . . . . . . . . . . . . . . . . .

P390,000

Liabilities . . . . . . . . . . . . . . . . . . .

P 60,000

Henry, capital . . . . . . . . . . . . . .

80,000

Isaac, capital . . . . . . . . . . . . . . .

110,000

Jacobs, capital . . . . . . . . . . . . .

140,000

Total . . . . . . . . . . . . . . . . . . . . . .

P 390,000

Estimated expenses of liquidation were P5,000. Henry, Isaac and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of total cash was available for safe payments to tall partners, based on the above information? 25,000 2. Liz, Bob, and Alex are partners in a company that is being liquidated. They share profits and losses 30 percent, 45 percent, and 25 percent, respectively. When the liquidation begins they have capital account balances of P20,000, P30,000, and P15,000, respectively. The partnership just incurred liquidation expenses of P30,000 and sold equipment with a book value of P90,000 for P50,000. What is the balance in Liz’s capital account after these transactions are completed? -1,000

3. The balance sheet of the Nebe, Oak, and Pang partnership on October 1, 20x4 (the date of partnership dissolution) was as follows: Cash

P

Other assets

33,000

Loan to Oak

Total assets

3,000 4,000

P

40,000

Liabilities

P

9,000

Loan from Nebe

1,000

Nebe, capital (20%)

3,000

Oak, capital (30%)

6,000

Pang, capital (50%)

21,000

Total liab./equity

P

40,000

In October, other assets with a book value of P15,000 were sold for P17,000 in cash. How much will Nebe receive on the available cash on October 20x4? 0 4. The balance sheet of the Nebe, Oak, and Pang partnership on October 1, 20x4 (the date of partnership dissolution) was as follows: Cash

P

Other assets

33,000

Loan to Oak

Total assets

3,000 4,000

P

40,000

Liabilities

P

9,000

Loan from Nebe

1,000

Nebe, capital (20%)

3,000

Oak, capital (30%)

6,000

Pang, capital (50%)

21,000

Total liab./equity

P

40,000

In October, other assets with a book value of P15,000 were sold for P17,000 in cash. How much will Oak receive on the available cash on October 20x4? 0 5. The balance sheet of the Nebe, Oak, and Pang partnership on October 1, 20x4 (the date of partnership dissolution) was as follows: Cash

P

Other assets

33,000

Loan to Oak

Total assets

3,000 4,000

P

40,000

Liabilities

P

Loan from Nebe

1,000

Nebe, capital (20%)

3,000

Oak, capital (30%)

6,000

Pang, capital (50%)

21,000

Total liab./equity

P

In October, other assets with a book value of P15,000 were sold for P17,000 in cash.How much will Pang receive on the available cash on October 20x4? 11,000 6. The PQR partnership is being dissolved. The equity of the partners are as follows: Capital balance

Loan payable (receivable)

Profit ratio

P

24, 000

10, 000

2

Q

36, 000

-

4

R

60, 000

(2, 000)

4

On the first distribution of cash, R received P5, 000. How much was the total cash distributed to the partners? 12,500

7. The PQR partnership is being dissolved. The equity of the partners are as follows: Capital balance

9,000

Loan payable

Profit ratio

40,000

(receivable) P

24, 000

10, 000

2

Q

36, 000

-

4

R

60, 000

(2, 000)

4

On the first distribution of cash, R received P5, 000. How much did P receive in the distribution? 7,500 8. The PQR partnership is being dissolved. The equity of the partners are as follows: Capital balance

Loan payable (receivable)

Profit ratio

P

24, 000

10, 000

2

Q

36, 000

-

4

R

60, 000

(2, 000)

4

On the first distribution of cash, R received P5, 000. How much did Q receive in the distribution? 0 9. The following account balances were available for the Perry, Quincy and Rehnquist partnership just before it entered liquidation: Cash . . . . . . . . . . . . . . . . .

P 90,000

Noncash assets . . . . . . . . .

300,000

Answer 183,000

Total . . . . . . . . . . . . . . . . ..

P390,000

Liabilities . . . . . . . . . . . . . . . . . P 170,000 .. Perry, capital . . . . . . . . . . . . . . .

70,000

Quincy, capital . . . . . . . . . . . . .

50,000

Renquist, capital . . . . . . . . . . . .

100,000

Total . . . . . . . . . . . . . . . . . . . . ..

P 390,000

Perry, Quincy and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be P8,000. All partners were solvent. What would be the minimum amount for which the non-cash assets must have been sold for, in order for Quincy to receive some cash from the liquidation? Any amount in excess of _______________. 10.On June 30, 20x4, the Warle, Xin, and Yates partnership had the following fiscal year-end sheet: Cash . . . . . . . . . . . . . . . . . .

P

Accounts receivable . . . . .

4,000 Accounts payable . . . . .

P

7,000

6,000 Loan from Xin . . . . . . . . .

5,000

Inventory . . . . . . . . . . . . . . .

14,000 Warle, capital(20%) . . . .

14,000

Plant assets-net . . . . . . . . . .

12,000 Xin, capital(30%) . . . . . .

10,000

6,000 Yates, capital(50%). . . . .

6,000

Loan to Warle . . . . . . . . . . . Total assets . . . . . . . . . . . . . P

42,000 Total liab./equity

P

42,000

·

Receivables of P3,000 were collected, the balance still collectible.

·

All of the inventory was sold for P4,000.

·

Cash was distributed on July 31, except for P2,000 that was set aside for contingent expen

The book value of the partnership equity (i.e., total equity of the partners) on June 30, 20x4 is Answer 29,000 11.On June 30, 20x4, the Warle, Xin, and Yates partnership had the following fiscal year-end Cash . . . . . . . . . . . . . . . . . .

P

4,000 Accounts payable . . . . .

Accounts receivable . . . . .

P

6,000 Loan from Xin . . . . . . . . .

7 5

Inventory . . . . . . . . . . . . . . .

14,000 Warle, capital(20%) . . . .

14

Plant assets-net . . . . . . . . . .

12,000 Xin, capital(30%) . . . . . .

10

6,000 Yates, capital(50%). . . . .

6

Loan to Warle . . . . . . . . . . . Total assets . . . . . . . . . . . . .

P

42,000 Total liab./equity

P

42

·

Receivables of P3,000 were collected, the balance still collectible.

·

All of the inventory was sold for P4,000.

·

Cash was distributed on July 31, except for P2,000 that was set aside for contingent expen

The cash available for distribution to the partners on July 31, 20x4 is 2,000 12.On June 30, 20x4, the Warle, Xin, and Yates partnership had the following fiscal year-end sheet: Cash . . . . . . . . . . . . . . . . . .

P

Accounts receivable . . . . .

4,000 Accounts payable . . . . .

P

7,000

6,000 Loan from Xin . . . . . . . . .

5,000

Inventory . . . . . . . . . . . . . . .

14,000 Warle, capital(20%) . . . .

14,000

Plant assets-net . . . . . . . . . .

12,000 Xin, capital(30%) . . . . . .

10,000

6,000 Yates, capital(50%). . . . .

6,000

Loan to Warle . . . . . . . . . . . Total assets . . . . . . . . . . . . . P

42,000 Total liab./equity

P

42,000

·

Receivables of P3,000 were collected, the balance still collectible.

·

All of the inventory was sold for P4,000.

·

Cash was distributed on July 31, except for P2,000 that was set aside for contingent expen

How much cash would Warle receive from the cash that is available for distribution on July 31? 0 13.On June 30, 20x4, the Warle, Xin, and Yates partnership had the following fiscal year-end sheet: Cash . . . . . . . . . . . . . . . . . .

P

Accounts receivable . . . . .

4,000 Accounts payable . . . . .

P

7,000

6,000 Loan from Xin . . . . . . . . .

5,000

Inventory . . . . . . . . . . . . . . .

14,000 Warle, capital(20%) . . . .

14,000

Plant assets-net . . . . . . . . . .

12,000 Xin, capital(30%) . . . . . .

10,000

6,000 Yates, capital(50%). . . . .

6,000

Loan to Warle . . . . . . . . . . . Total assets . . . . . . . . . . . . . P

42,000 Total liab./equity

P

42,000

·

Receivables of P3,000 were collected, the balance still collectible.

·

All of the inventory was sold for P4,000.

·

Cash was distributed on July 31, except for P2,000 that was set aside for contingent expen

How much cash would Xin receive from the cash that is available for distribution on July 31? 2,000 14.A cash distribution plan for the Mathew, Norell and Reams partnership appears below: Creditors Frist 375, 000

100%

Mathew

Norell

Reams

Next 100, 000

70%

Next 87, 500

3/7

Remainder

22%

30% 4/7 34%

44%

If 687 500 of cash is to be distributed, compute the distribution to creditors, Mathew, Norell and Reams. For this number, answer how much will be received by the creditors? 375,000 15.A cash distribution plan for the Mathew, Norell and Reams partnership appears below: Creditors

Mathew

Norell

Next 100, 000

70%

30%

Next 87, 500

3/7

Remainder

22%

Frist 375, 000

Reams

100%

4/7 34%

44%

If 687 500 of cash is to be distributed, compute the distribution to creditors, Mathew, Norell and Reams. For this number, answer how much will be received by the Mathew? 135,000 16.A cash distribution plan for the Mathew, Norell and Reams partnership appears below: Creditors

Mathew

Norell

Next 100, 000

70%

30%

Next 87, 500

3/7

Remainder

22%

Frist 375, 000

Reams

100%

4/7 34%

44%

If 687 500 of cash is to be distributed, compute the distribution to creditors, Mathew, Norell and Reams. For this number, answer how much will be received by the Norell? 72,500 17.A cash distribution plan for the Mathew, Norell and Reams partnership appears below: Creditors

Mathew

Norell

Next 100, 000

70%

30%

Next 87, 500

3/7

Remainder

22%

Frist 375, 000

Reams

100%

4/7 34%

44%

If 687 500 of cash is to be distributed, compute the distribution to creditors, Mathew, Norell and Reams. For this number, answer how much will be received by the Reams? 105,000

18.The partnership of Mick, Keith, and Charlie has been dissolved and is in the process of liquidation. On July 1, 20x4, just before the second cash distribution, the assets and equities of the partnership along with residual profit sharing ratios were as follows: Assets

Liabilities and Equity

Cash . . . . . . . . . . . . . . . . .

P 200,000

Receivables Net . . . . . . .

50,000

Liabilities . . . . . . . . . . . . . . . . ...

P150,000

Mick, Capital 50% . . . . . . . . . .

100,000

. Inventories . . . . . . . . . . . .

150,000

Keith, Capital 30% . . . . . . . . . . .

Equipment-net . . . . . . . .

100,000

Charlie, Capital 20% . . . . . . . . .

Total Assets . . . . . . . .

P500,000

Total Liabilities and Equity . .

175,000 75,000 P500,000

Assume that the available cash is distributed immediately, except for a P25,000 contingency fund that is withheld pending complete liquidation of the partnership. Compute how much cash should be paid to Mick, Keith, Charlie. For this number, answer how much cash should be paid to Mick. 0 19.The partnership of Mick, Keith, and Charlie has been dissolved and is in the process of liquidation. On July 1, 20x4, just before the second cash distribution, the assets and equities of the partnership along with residual profit sharing ratios were as follows: Assets

Liabilities and Equity

Cash . . . . . . . . . . . . . . . . .

P 200,000

Receivables Net . . . . . . .

50,000

Inventories . . . . . . . . . . . . Equipment-net . . . . . . . . Total Assets . . . . . . . .

Liabilities . . . . . . . . . . . . . . . . ...

P150,000

Mick, Capital 50% . . . . . . . . . . .

100,000

150,000

Keith, Capital 30% . . . . . . . . . . .

175,000

100,000

Charlie, Capital 20% . . . . . . . . .

P500,000

Total Liabilities and Equity . .

75,000 P500,000

Assume that the available cash is distributed immediately, except for a P25,000 contingency fund that is withheld pending complete liquidation of the partnership. Compute how much cash should be paid to Mick, Keith, Charlie. For this number, answer how much cash should be paid to Keith. 25,000 20 The partnership of Mick, Keith, and Charlie has been dissolved and is in the process of liquidation. On July 1, 20x4, just before the second cash distribution, the assets and equities of the partnership along with residual profit sharing ratios were as follows: Assets

Liabilities and Equity

Cash . . . . . . . . . . . . . . . . .

P 200,000

Receivables Net . . . . . . .

50,000

Inventories . . . . . . . . . . . . Equipment-net . . . . . . . . ...